Hedge Funds Are Dumping Nordstrom, Inc. (JWN)

In this article we will check out the progression of hedge fund sentiment towards Nordstrom, Inc. (NYSE:JWN) and determine whether it is a good investment right now. We at Insider Monkey like to examine what billionaires and hedge funds think of a company before spending days of research on it. Given their 2 and 20 payment structure, hedge funds have more incentives and resources than the average investor. The funds have access to expert networks and get tips from industry insiders. They also employ numerous Ivy League graduates and MBAs. Like everyone else, hedge funds perform miserably at times, but their consensus picks have historically outperformed the market after risk adjustments.

Nordstrom, Inc. (NYSE:JWN) was in 25 hedge funds’ portfolios at the end of September. The all time high for this statistic is 38. JWN has seen a decrease in activity from the world’s largest hedge funds in recent months. There were 31 hedge funds in our database with JWN positions at the end of the second quarter. Our calculations also showed that JWN isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings).

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium prices have more than doubled over the past year, so we go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. With all of this in mind we’re going to analyze the latest hedge fund action surrounding Nordstrom, Inc. (NYSE:JWN).

Peter Rathjens of Arrowstreet Capital

Do Hedge Funds Think JWN Is A Good Stock To Buy Now?

At third quarter’s end, a total of 25 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -19% from one quarter earlier. On the other hand, there were a total of 29 hedge funds with a bullish position in JWN a year ago. With the smart money’s capital changing hands, there exists a few noteworthy hedge fund managers who were upping their holdings substantially (or already accumulated large positions).

Of the funds tracked by Insider Monkey, Brett Barakett’s Tremblant Capital has the most valuable position in Nordstrom, Inc. (NYSE:JWN), worth close to $117.7 million, accounting for 3.7% of its total 13F portfolio. Sitting at the No. 2 spot is Two Sigma Advisors, managed by John Overdeck and David Siegel, which holds a $74.2 million position; the fund has 0.2% of its 13F portfolio invested in the stock. Remaining professional money managers that are bullish include Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital, Paul Marshall and Ian Wace’s Marshall Wace LLP and Ken Griffin’s Citadel Investment Group. In terms of the portfolio weights assigned to each position Empirical Capital Partners allocated the biggest weight to Nordstrom, Inc. (NYSE:JWN), around 15.01% of its 13F portfolio. Pacifica Capital Investments is also relatively very bullish on the stock, dishing out 4.78 percent of its 13F equity portfolio to JWN.

Because Nordstrom, Inc. (NYSE:JWN) has witnessed falling interest from the aggregate hedge fund industry, it’s safe to say that there lies a certain “tier” of fund managers who were dropping their positions entirely by the end of the third quarter. At the top of the heap, Ryan Tolkin (CIO)’s Schonfeld Strategic Advisors dumped the biggest stake of all the hedgies watched by Insider Monkey, totaling close to $30.2 million in stock. Alexander Mitchell’s fund, Scopus Asset Management, also said goodbye to its stock, about $18.3 million worth. These bearish behaviors are interesting, as total hedge fund interest was cut by 6 funds by the end of the third quarter.

Let’s check out hedge fund activity in other stocks similar to Nordstrom, Inc. (NYSE:JWN). We will take a look at Sanderson Farms, Inc. (NASDAQ:SAFM), Portland General Electric Company (NYSE:POR), Hannon Armstrong Sustnbl Infrstr Cap Inc (NYSE:HASI), Shutterstock Inc (NYSE:SSTK), Daqo New Energy Corp (NYSE:DQ), Signet Jewelers Limited (NYSE:SIG), and Ballard Power Systems Inc. (NASDAQ:BLDP). All of these stocks’ market caps match JWN’s market cap.

View table here if you experience formatting issues.

As you can see these stocks had an average of 20.9 hedge funds with bullish positions and the average amount invested in these stocks was $353 million. That figure was $365 million in JWN’s case. Signet Jewelers Limited (NYSE:SIG) is the most popular stock in this table. On the other hand Portland General Electric Company (NYSE:POR) is the least popular one with only 15 bullish hedge fund positions. Nordstrom, Inc. (NYSE:JWN) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for JWN is 46.5. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 31.1% in 2021 through December 9th and beat the market again by 5.1 percentage points. Unfortunately JWN wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on JWN were disappointed as the stock returned -20.4% since the end of September (through 12/9) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as many of these stocks already outperformed the market since 2019.

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Disclosure: None. This article was originally published at Insider Monkey.